The 2015 Summer Budget announced some important changes to the annual allowance – this is the maximum value of pension that you can earn in any year without incurring tax penalties. The main changes will first apply in the 2016/17 tax year.

The key change announced is that the standard annual allowance of £40,000 will be reduced for those whose total income is above £150,000. In working out whether your income is above £150,000, you need to include the increase in value of your pension over the tax year – broadly this is 16 times the increase in your pension during the year. This is called "adjusted income". For every £2 of adjusted income you have over £150,000, your annual allowance will be reduced by £1. The maximum reduction is £30,000, leaving an annual allowance of £10,000. So once your income is over £210,000, there is no further reduction. If your taxable income - after pension contributions and other reliefs - is £110,000 or less, then these rules will not apply.

For TPS, it is currently the value of your pension accrual from 1 April to 31 March each year that is used for testing against the annual allowance. However, this is also changing. Starting with the 2016/17 tax year, the value of your pension accrual in a particular tax year will be used in the assessment. The rules for the 2015/16 tax year are more complicated while we move to the new regime discussed above but are expected to be better for TPS members than the existing annual allowance test.

As the changes to the annual allowance are very complicated, we would recommend that you get independent financial advice if you think you may be affected by the changes.